Self employed: claiming mileage but claiming VAT on repairs?

Monsoon

VAT rules are different to income/corporation tax rules.

With that in mind...

If a business pays for repairs/servicing on a car that's used in the business, even if there is private use, the business can reclaim all the VAT.

Does that still apply if the business is claiming 45p a mile? Presumably they can claim the VAT element of the Advisory Fuel Rate, but that's just for fuel.

Can they claim the VAT on the servicing, and then disallow the net cost in the tax comp?

PGM

Good question, because the mileage rate used to include an element of vat, but only on the fuel part. So it makes sense you should be able to claim the vat on repairs..

Bluewednesday

I take it that the business isn't above the VAT registration turnover limit and has voluntarily registered for VAT?

Monsoon

PGM wrote: »

Good question, because the mileage rate used to include an element of vat, but only on the fuel part. So it makes sense you should be able to claim the vat on repairs..

Agreed.

Bluewednesday wrote: »

I take it that the business isn't above the VAT registration turnover limit and has voluntarily registered for VAT?

Yes. Or went over, but haven't changed vehicle yet and so can't change off mileage rate.

Bluewednesday

I asked because when you first posted that I didn't know the answer, then panicked that I'd done something wrong with some of our clients but then remembered that all ours that claim mileage rate are not VAT registered or part of a limited company and repair bills don't go through!

Monsoon

So you don't know the answer either?

No, I've not had this scenario come up either. Like you say, it's usually one or the other.

Bluewednesday

Will fully admit that I don't!

Monsoon

Me either.

Ok, I know I'm going off the HMRC website here and not the legislation (I'll get to that later) but it says you can claim the VAT on servicing is the business pays for the servicing. That's ambiguous. The business can pay for it and then it can be added back in the tax comp. Or, because the net is effectively drawings from a tax point of view, has the business paid for it? Or because the business card was used, the business has paid for it. Does that mean if they paid for it personally and the business reimbursed via an expense claim it wouldn't count even if they were using an apportionment basis?

I wish HMRC would give references to the legislation on their website so we can easily find the right section. I'll start at VATA 1994...

Monsoon

And CCH online says.....

“VAT on repairs, etc to a privately owned car that is covered by a mileage allowance [...] cannot be treated as input tax.”

Annoyingly, CCH online (provided free to AAT MIPs, folks, I've never used it before, it looks quite good) don't quote chapter and verse either, which would be helpful.